An independent review of your bank’s ALM process is crucial to optimizing net earnings, growing equity, maintaining stability, and managing Interest Rate Risk. Our comprehensive process review provides your bank with the assurance that you are making strategic decisions based upon accurate and reliable information.
After ten years of low rates and a relatively flat yield curve, the current increasing rate environment and steeper yield curve have increased regulator scrutiny on ALM models and assumptions. This demands additional reporting and analysis to ensure your bank is adequately positioned to perform as rates fluctuate.
ASSET LIABILITY MANAGEMENT AND RELATED POLICIES
We perform a comprehensive review of your policies to ensure they are appropriate for the size and complexity of your balance sheet. We review policies for completeness and ensure that controls appropriately reflect your bank’s risk appetite.
• ALM Policy
• Liquidity Policy
• Contingent Funding Policy
• Investment Policy
• Capital Policy
ASSET LIABILITY GOVERNANCE
We review the entire ALM process for proper bank governance of the risk analyzed in the models and the review of strategies.
• ALM reporting materials
• ALCO minutes
• Related Board and Risk Committee minutes
• Board/Committee Education
ALM MODEL CONTROLS AND ASSUMPTIONS
The assumptions used in the model are critical to proper evaluation of the risks inherent in your bank’s balance sheet. Our independent review of the assumptions gives you assurance that your bank’s model is accurately simulating the financial results.
• Source data files accuracy
• Pricing assumptions (drivers and spreads)
• Deposit betas and deposit studies
• Prepayment speeds (loans and securities)
• Decay rates
REPORTING AND STRATEGIC ANALYSIS
The true value of the ALM model is the reporting you can rely on to discuss and implement effective strategies on the balance sheet. In reviewing the reports, we analyze the outputs and results to make sure your bank has the correct information to make timely decisions as the market presents itself.
• Financial statement forecasts
• IRR reports
• EVE Reports
• Back Test
• Stress Tests